Power Play in Debit Card Swipe Fee Fight

In the war between big banks and big retailers over control of your wallet, the retailers just won a small but potentially important battle. By pushing Senator Jon Tester (D – Mont.) to retreat on his call for a two-year delay on new limits for debit card swipe fees, the Merchants Payments Coalition may have shown retailers to be one of the few industries with lobbying power to match that of banks.

But that doesn’t mean the fight is anywhere near finished.

“Make no mistake, the big banks are going to do fine no matter what,” Tester said on the Senate floor.

Tester had proposed a two-year delay on new rules for interchange fees, which are charged every time consumers swipe their debit cards. Merchants retaliated with an advertising campaign against Tester, who faces a tough reelection battle against Republican Congressman Denny Rehberg.

“This isn’t a compromise,” Lyle Beckwith, a lobbyist for the National Association of Convenience Stores, said in a press release. “This is an abdication of good policy, a handout to the big banks and a betrayal of small businesses and their customers.”

It may have been the first time the term “interchange fee” ever appeared in a radio or television campaign ad. And it appears to have worked. On Wednesday Tester retreated, calling for a delay of 15 months instead of 24 so that regulators can study the issue more closely. Tester called 15 months the “bare minimum to get this study right.”

The banking industry appears to support the shortened study period, since it may help avoid a filibuster by Senators who want to impose the Fed’s proposal now.

“If the current proposed rule were in place today, financial institutions would not have the resources necessary to guard the security of the networks or to protect consumers from the extensive harm that can result from the violation of their personal information such as fraud and identity theft,” The Electronic Payments Coalition, a banking industry trade group, said in a press release.

Currently the fees average 44 cents per swipe. The Dodd-Frank financial reform act requires the fees to be lowered, and the Federal Reserve proposed capping them at 12 cents. The fees are invisible to consumers; instead merchants pay them by increasing the cost of retail goods.

The Fed’s proposal prompted protest from banks, which said the cap was so low they would lose money every time someone used their debit swipe machines at a cash register. Small banks argue the cap could drive them out of business.

Merchants respond that only the nation’s 100 largest banks would be subject to the cap.

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